SEC employees harness big data, cloud to open up savings and new possibilities

Nicole Ogrysko reports

After a particularly dramatic day four years ago on the U.S. Stock Exchange, the
Securities and Exchange Commission realized it needed an easier way to make its
records public and sort through millions of trading data for a quick analysis.

On May 6, 2010, markets plunged 1,000 points within the span of about five
minutes. It took the SEC several months to gather data across national markets and
determine what actually happened during the "2010 Flash Crash."

It wasn't until Sept. 30, 2010 that the SEC and Commodity Futures Trading
Commission released their findings in a public report.

To respond quickly to the next financial flash crash, the SEC realized it needed
billions of daily trade records at its fingertips. The agency also wanted its staff and — and the public
— to have easier access to 21
million financial reports on the SEC's website from companies whose securities trade on stock exchanges.

The staff embarked on the SEC.gov's modernization project, which is already saving the agency a little more than
$3 million a year.

In part four of Federal News Radio's special report, Rainmakers and Money Savers, we take an inside look at
how much money is brought into the federal coffers due to the work of a specific
group of federal employees.

MIDAS combs through records

The SEC's move to the cloud is the base for several other projects that are saving
the agency time and money. Modernizing the SEC's website as a whole saves the
agency just over $3 million a year.

MIDAS collects and combs through one billion trading records a day — a
process which previously took the agency weeks and months — and analyzes the
data across several national markets at the same time. Users can find and interact
with the records using clear and simplified graphs charts on the SEC's website.

Laura Egerdal, director of digital strategy within the SEC's Office of Public
Affairs, is one of the many employees behind MIDAS. Along with members of SEC's
Office of Trading and Markets and Office of Information Technology, she helped
build, design and write the code for the MIDAS visualization tool in about two
months.

"I proposed a visualization tool that would put graphs in the browsers that people
could play with, where you could actually adjust what data sets you're looking at,
adjust metrics like time, adjust what kind of security products you're looking at,
like stocks or exchange traded funds, and actually play with them and answer some
of these questions right in the browser," Egerdal said. "The idea is that it would
reach much more people, engage more people in a conversation and ultimately be a
much more efficient way to get this information online."

She said it's difficult to estimate how much MIDAS itself is saving the SEC,
because it's doing something the agency has never done before.

But because Egerdal — under the direction of Office of Analytics and
Research Associate Director Gregg Berman — built the MIDAS visualization,
the SEC was able to save time and valuable contracting dollars.

The SEC estimates it would have had to spend at least $50,000 for a contractor to
build the MIDAS website, plus extra expenses to design the strategy and overall
look of the charts and graphs.

Egerdal also helped lead SEC.gov's move to the cloud — an effort that, in
part, helped the SEC implement MIDAS more quickly. Instead of hosting one billion
daily market records in house, the SEC holds its raw data files on the cloud.
MIDAS then pulls specific pieces of data through to analyze them.

Before the SEC moved to the cloud, SEC.gov needed to handle sudden spikes in
traffic. She said the agency's move to a cloud-based content delivery network has
cut back the SEC's maintenance and operations costs for its website by about 45
percent.

Beyond the dollars SEC is saving, its cloud and IT projects are setting
unprecedented capabilities for the agency.

"It's also sharing information that's never been shared before with a very, very
wide audience at a low cost," Egerdal said. "We've really expanded our capability
and expanded the amount of information that's available to the public."

MIDAS' quick turnaround is another part of the SEC's cost savings. The agency
issued a request for information in October 2010, sent a request for proposal in
November 2011 and awarded a contract for a market data solution in June 2012.
MIDAS rolled out in January 2013. Once the agency collected enough data, Egerdal built the MIDAS
visualization tool in about two months.

"I've really focused [on] truly understanding what the need is," she said. "If you
install a data analytics program and you're getting all this data in, but you
don't know what questions you're asking, you're going to be spending a lot of time
spinning your wheels."

Better exams through NEAT

Thanks to the SEC modernization project, another new agency software is also beginning to save the agency
thousands of hours of valuable time.

The SEC has about 1,000 examiners who collect transactional records from a variety
of trading firms. What was once a manual and tedious process is now automated and
faster because of the National Examination Analytics Tool. NEAT lets the SEC's
examiners conduct more investigations more quickly.

For example, the SEC said one of its exam teams analyzed 17 million transactions
from one investment adviser in about 36 hours using NEAT.

Erozan Kurtas

Erozan Kurtas, an assistant regional director for the SEC, conceptualized and
designed NEAT. He also leads the Quantitative Analytics Unit, which built the
project over one year.

"It saves [us] thousands of hours, maybe tens of thousands of hours, but the other
issue is NEAT allows us to do better exams, more sophisticated exams," Kurtas
said. "This increases the possibility of catching violations, which is the
important part of our job."

Because the system can automatically calculate where, when and how a specific firm
makes its money, NEAT reduces the opportunities SEC examiners have to make
mistakes. Before NEAT was built, examiners manually wrote the code for millions of
transactional records.

An examiner's investigation and analysis might take several weeks or months,
Kurtas said. Now, NEAT automatically searches for everything from insider trading
events and front running to portfolio and account level concentrations.

NEAT also eliminates some of the uncertainty during the investigation process.
Examiners no longer have to guess when a trading incident may have occurred.
Instead, they can look at an investment firm's records in bulk and analyze the
data.

"Let's say we are looking for insider trading events, and if you don't know the
time period, it becomes a shot in the dark," Kurtas said. "NEAT empowers the
examiners to collect four, five years of transaction data from the registrants
[and analyzes it]. That way, we don't have to guess anything. We basically do not
have a limit in terms of a time period to audit, which is big deal."

Next steps for SEC

These projects have long legs for the agency.

Kurtas said his team is using NEAT as the base for his examination of high
frequency trading firms.

Egerdal said the SEC plans use the code she wrote for the MIDAS visualization
tools on other data sets, in order to save costs.

"We worked hard to make that code reusable, so we're very excited to take other
data sets that the SEC has available and that aren't currently being shared with
the public in a really usable and accessible way and put more and more data into
this online system," she said. "So we can really expand what the public has
access to on SEC.gov, and that's going to be at a very low cost, because we can
reuse the code we already created."